Municipal Policies Requiring Prevailing Wages for Contractors Fail to Prevail Under the Local Government Labor Regulatory Limitation Act
In 2015, the State of Michigan enacted the Local Government Labor Regulatory Limitation Act (the “LGLRLA” or the “Act”), which places restrictions on the regulatory authority of local governmental bodies pertaining to employment relationships between nonpublic employers and their employees. The Act declares that “regulation of the employment relationship between a nonpublic employer and its employees is a matter of state concern” and prohibits local governments from regulating various aspects of employment. A recent Court of Appeals’ decision involving the LGLRLA construed the Act to prohibit a municipality from requiring contractors who work on municipal projects to pay employees a prevailing wage rate.
The LGLRLA contains numerous prohibitions that preclude local governmental units from regulating certain employment practices. Under Section 6 of the Act, “[a] local governmental body shall not adopt, enforce, or administer an ordinance, local policy, or local resolution requiring an employer to pay an employee a wage or fringe benefit based on wage and fringe benefit rates prevailing in the locality.” Other provisions in the LGLRLA prohibit municipalities from adopting, enforcing, or administering an ordinance, local policy, or local resolution that regulates work stoppage or strike activity, or the type of information an employer may require or request from potential employees during the hiring process, or that requires fringe benefits or leave time for workers, or compulsory participation in apprenticeship programs by employers or employees. The LGLRLA’s prohibitions, however, do not apply to employment by local governmental bodies or public educational institutions. So, the LGLRLA does not prevent a municipality from regulating its own employment practices. The LGLRLA also only applies to ordinances, local policies, and local resolutions adopted after December 31, 2014, so it does not prohibit municipalities from enforcing local regulations that were already in effect before that date.
In 2021, the Meridian Township Board adopted “Guidelines” that required contractors working on a Township contract for more than $50,000.00 to pay prevailing wages and fringe benefits to employees. Shortly thereafter, a trade association sued the Township, claiming that the Guidelines were adopted in violation of the LGLRLA. On appeal, the Michigan Court of Appeals affirmed the trial court’s determination that the Guidelines violate the Act. The Court concluded that the Guidelines were tantamount to a local policy or resolution, and the requirement that all contractors working on Township contracts pay their employees prevailing wages and fringe benefits fell within the scope of the prohibition in Section 6 of the Act.
However, even though the LGLRLA prohibits a local governmental body from adopting a blanket policy effectively barring bid awards to contractors that do not pay prevailing wages, the Court indicated that local governments may consider wage levels when choosing amongst bids for a particular contract. The Court also noted that the Act does not prohibit a municipality from entering into a contract containing a prevailing wage requirement; those provisions just can’t be required by ordinance, policy, or resolution.
The LGLRLA’s provisions significantly restrict municipality’s regulatory authority over employment practices. Before adopting an ordinance, policy or resolution pertaining to qualifications or employment practices of contractors, local governmental bodies should check with a municipal attorney to ensure compliance with the LGLRLA. Local government officials are encouraged to contact Mika Meyers with any inquiries about compliance with the LGLRLA.
